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Russian Integrated Oil Companies May Have Great Problems

Russian companies with oil refining assets lose the most becuase the crude prices decrease, because refineries are profitable only at $60 per barrel or higher, VTB says

In terms of net income, Gazprom Neft and TNK-BP are the most sensitive to the price decline, the VTB research said. They lose 24 percent and 20 percent in profits, respectively, for each cut of $10 per barrel in Brent price assumptions.

That's because oil refining assets are less profitable than production units, which according to the research would generate profit even at $15 per barrel.

The critical point for the refineries is below $47 per brent oil barrel, unless they take cost-cutting measures.

However, the analysts are sure that at the "current level of market pessimism," $50 per barrel is the most bearish scenario for oil stock valuations, VTB said. Even so, the costs of crude production globally would not allow prices to stay that low for long, it said.